The sharp drop was sparked by reports on Tuesday its associate Wilmar International Ltd had placed a US$729 million (RM3.1 billion) security deposit with Indonesia’s Attorney General’s Office (AGO) amid corruption charges levelled against several of its subsidiaries.
Over the four trading days since Wilmar announced this in a filing with the Singapore Exchange (SGX), PPB shares have dropped as much as 10%, or RM1.09, to RM9.89 in morning trade today. The shares last traded below the RM10 level in April 2009.
It clawed back most of its losses by the mid-day break to RM9.96, valuing the group at RM14.17 billion. It has tumbled nearly 20% year to date, and 31% over the past year.
Wilmar’s filing stated the US$729 million security deposit will be forfeited if Indonesia’s Supreme Court rules against Wilmar but will be refunded if the court upholds the earlier decision by the Central Jakarta Court.
Indonesian prosecutors are appealing a court ruling that had cleared Wilmar’s subsidiaries and two other palm oil companies of paying bribes to obtain permits in 2022.
In April 2024, the AGO brought charges of harming state finances, unauthorised profits and harming the business sector against five subsidiaries of the Wilmar group.
The charges stem from alleged corrupt actions taken by these subsidiaries between July 2021 and December 2021 during a shortage of cooking oil in the Indonesian market.
In its defence, Wilmar claims all acts carried out by the subsidiaries in relation to the export of cooking oil was “done in compliance with prevailing regulations”.
Rising risk premium
Kenanga Research said the security deposit issue could raise PPB’s risk premium and weigh on the stock for as long as the matter remains unresolved, especially given that Indonesia accounts for approximately 10% of its business operations.
In a note, the research house estimated PPB’s share of the deposit would be about RM600 million or 42 sen per share.
Kenanga downgraded its rating on the stock to “market perform” from “outperform” and cutting its target price to RM10.50 from RM15, citing a higher risk premium.
According to Bloomberg, PPB’s average target price from five analysts has been revised down to RM12.18 from RM13.30, primarily due to Kenanga’s downgrade.
Wilmar is PPB’s key profit contributor, contributing RM992 million to its total profit before tax of RM1.33 billion in FY2024.
PPB is a diversified conglomerate which engages in food production, agriculture, waste management, film distribution, property investment and development. It was founded in 1968 as Perlis Plantations Bhd by Kuok to cultivate and mill sugar cane in Perlis.
The company went public in 1972 and has since ventured into other industries. Its listing coincided with Kuok shifting the focus of his business outside Malaysia, especially to Singapore.
Today, its main business is the supply of flour to downstream food producers. Its subsidiary FFM Bhd is the largest flour miller in Malaysia. PPB also has operations in China, Vietnam and Thailand.
According to its 2024 annual report, Kuok controls PPB via his private vehicle Kuok Brothers Sdn Bhd, which has a 50.56% stake. The next largest shareholder is the Employees Provident Fund (EPF) with 13%.
Kuok, who has a net worth of US$12.1 billion (RM51.53 billion) according to Forbes, founded the Shangri-La Hotels and Resorts chain in Singapore in 1971. His nephew Kuok Khoon Hong runs Wilmar as its chairman and CEO.